Bitcoin has recovered over $23,000 on several occasions now, but the digital asset remains in a perilous position. Indeed, the recovery alone was not able to guarantee that the uptrend would last. On the contrary, it diminished the brief buying and selling pressures that have plagued investors lately. Bitcoin’s open interest also reflects this fact and shows how easy it would be for bitcoin to lose its position.
Bitcoin Open Interest Remains High
Over the past week, open interest in bitcoin has increased. After hitting over 300,000 the previous week, there was no stopping this part of the market. However, he also pointed out other peculiarities regarding the current bitcoin uptrend.
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On the one hand, the high open interest denominated in bitcoins shows that there is very high leverage in the crypto market. As with any market, such high leverage always puts the value of the digital asset in a perilous position. It could swing back and forth resulting in a short press or a long press. Whatever the case, the results are often the same; there are significant price swings that would go either way.
BTC recovers above $23,000 | Source: BTCUSD on TradingView.com
With bitcoin’s current movement, it’s more likely that a long squeeze would be the end of it. This would likely see the price drop and touch $20,000. But if, by chance, it ends in a short squeeze, the price of bitcoin could very well go back to $25,000.
Lower financing rates
Last week, the market saw some much-needed bullish sentiment from perpetual traders as funding rates returned to neutral levels. Given that funding rates had spent weeks hovering below neutral, this was a welcome change, albeit briefly.
It looks like the positive rally will only last for a week as bitcoin funding rates have started falling back into negative territory. It shows a direct decline from neutral, indicating that traders were reverting to more cautious trading.
Funding rates fall below neutral | Source: Arcane Research
Interestingly, however, is the fact that despite lower funding rates, they continue to maintain higher lows. It shows better prospects compared to June, which was characterized by funding rates that were perpetually below neutral.
What this shows is that although bitcoin traders are more cautious, they have not written off the digital asset entirely. This improvement in market sentiment has been reflected in bitcoin’s recent rally. However, for this to continue, funding rates would need a reversal from here.
Featured image from GoBankingRates, charts from Arcane Research and TradingView.com
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